I feel that the House will almost expect me to say that I am not in a position to make any statement, but I am very happy to inform the House that there need be no repetition to-night of the incidents of yesterday. I am now able to give them all the information in my possession. I should like to take this opportunity of thanking the House, all sections of it, for the patience and forbearance which they showed yesterday in circumstances which I must admit were extremely trying.

I have repeatedly been asked in the course of the last few weeks what were the intentions of His Majesty's Government with regard to the instalment of the American War Debt falling due tomorrow. It was not possible for me to answer those questions before the Recess, for the simple reason that conversations upon the subject were in progress in Washington but had not yet reached a conclusion. His Majesty's Government, however, have been anxious that the House should have the earliest information possible on the subject, and it was accordingly arranged that I should make a statement yesterday, when it was expected that a definite decision could be announced. It was, however, as the House will realise, essential that the announcements in London and Washington should be synchronised, and it was not found possible to provide for this until the present moment. I hope that with this explanation hon. Members will forgive me for the inconvenience which has been caused to them.

The House will remember that the last instalment of the debt due on the 15th December was the subject of an exchange of Notes between ourselves and the American Government. In our Note of 11th December last we set out at some length our conviction that the continued payment of these inter-Governmental obligations was a fatal barrier to the recovery of the world. Our standpoint on this matter was reinforced by the Preparatory Committee for the World Conference, which, at the outset of their report, pointed out that the problem of inter-Governmental indebtedness had not been included because it lay outside their terms of reference. The committee went on to say: In our opinion, however, it is essential that this question shall be settled and that the settlement shall relieve the world of further anxiety concerning the disturbing effects of such payments upon the financial, economic and currency stability. Until there is such a settlement, or the definite prospect of such a settlement, these debts will remain an insuperable barrier to economic and financial reconstruction. We therefore attach the greatest importance to the early resumption and successful conclusion of negotiations upon this problem. We had hoped that the discussions with America last year might have led to some arrangement which would have avoided the necessity for the payment of 15th December. We had, however, to take account of the political situation in the United States. The Administration had been defeated at the elections and was carrying on without being able to exercise effective authority until the new President took office. We were, however, informed that the United States Government would be prepared to review the whole situation with us without loss of time, and we were assured that the prospects of a satisfactory approach to the whole question would be greatly increased by payment on the 15th December. In these circumstances, we felt that the right course was to allow time for negotiations by making payment on that date. But we explained in our Note of the 11th December that this payment was not to be regarded as a resumption of the annual payments contemplated by the existing Agreement, and we announced our intention of treating it as a capital payment of which account should be taken in any final settlement. We added that the procedure adopted must obviously be exceptional and abnormal and we urged upon the United States Government the importance of an early exchange of views with the object of concluding the proposed discussion before the 15th June next in order to obviate the risk of a general breakdown of existing inter-Governmental agreements. Negotiations were accordingly started, even before the new Administration was inaugurated, and have been pursued ever since. On the occasion of the Prime Minister's visit to Washington, he and the President made preliminary explorations of the situation. As stated in the communique issued at the time: with the most friendly spirit progress is being made. After the Prime Minister's departure these conversations can well continue in London and Washington. The visit of the Prime Minister to Washington established an atmosphere of understanding and good will on both sides which has been of the utmost value throughout all our subsequent conversations. But, as was made clear at the time, the Prime Minister's journey was undertaken only for the purpose of elucidating the position, and indeed it was not possible in the time at his disposal to arrive at a final conclusion even if he had desired to do so. In these circumstances His Majesty's Government hoped that it would have been possible for the Government of the United States to accede to their request that the payment of the June instalment should be postponed pending the discussion of War Debts as a whole. They maintained this hope up to a very recent date, but in the end it became clear that it would not be realised and they had, therefore, to decide upon their course of action in the circumstances as they found them.

In considering their decision, the Government felt that they must have regard to its effects not only upon this country but upon the whole world. The Conference which is now sitting in South Kensington is recognised by all as of the most momentous character, and delegate after delegate has already urged the disastrous consequences which would ensue if it failed and the necessity for a sense of confidence if it is to succeed. We had already made a payment in December in the hope that it would pave the way to a settlement before another payment became due. If we paid again there would appear to be no reason why we should not continue to be called upon to make payments of a similar kind indefinitely. But it seemed to us impossible to contemplate that this country should continue to make payments of this magnitude while under the Lausanne provisional agreements we had suspended the corresponding claims upon our own debtors. Further payment would, therefore, have necessitated putting an end to the Lausanne agreements, reopening all the vexed questions of Reparations and War Debts which were there provisionally settled and plunging the world once more into the condition of uncertainty and despair from which it was rescued last year. These considerations appeared to the Government to be of such fundamental importance as to outweigh all others.

On the other hand, we felt the strongest objection to any course which would have placed us in the position of having repudiated our obligations. In our view, the proper way to treat the June instalment was to consider it as merged in the body of the debt which we (had already discussed informally and as to which we were prepared to enter upon formal negotiations as soon as they could be arranged. We therefore decided that in order to make perfectly clear our view that the suspension of the June payment did not and was not intended to prejudice the ultimate settlement, we would propose to make a payment of 10 million dollars as an acknowledgement of the debt, pending a final settlement. I am happy to say that the President, while formally taking note of our communication, has issued a statement which shows that he has appreciated the spirit in which our proposal was made, and he has expressed himself in terms which I propose to read to the House and which will I am sure give as much satisfaction to the House as they have to His Majesty's Government. After remarking that: Such payment does not of course in any sense prejudice the freedom of either Government in any subsequent discussion of the entire debt question which will take account of this and other debt payments, he adds in a later passage: It seems the part of fairness and wisdom to postpone formal representations on the debt subject until later. Meanwhile the World Economic Conference is beginning under most favourable auspices, and it is vitally necessary that during the opening days of the Conference difficult and possibly protracted discussion of the debt be avoided. In a spirit of co-operation I have as executive noted the representations of the British Government with respect to the payment of the June 15th instalment inasmuch as the payment made is accompanied by a clear acknowledgement of the debt itself. In view of those representations, and of the payment, I have no personal hesitation in saying that I do not characterise the resultant situation as a default. I need only add that we propose to make this payment in silver, which we have been informed by the United States Government will be accepted at 50 cents a fine ounce. The Government have acquired this silver from the Government of India.

The various documents exchanged between the two Governments have been printed and will be available in the Vote Office this evening. From them it will be seen that the Government have asked when and where the formal negotiations about the whole debt question can be begun and that the President has suggested that they should be taken up in Washington as soon as convenient. I trust the House will feel satisfied, as we on this bench feel satisfied, that this very difficult and delicate problem has been adjusted in a manner which is of good augury for the success of the World Conference, and which may prove to be the first step towards the complete and final settlement of the whole question of War debts.